British Business Bank to target SMEs | Bradleys Accountants

The British Business Bank, Vince Cable’s highly touted project for boosting finance for smaller companies, begins operations this year and is set to target start-ups and small to medium companies with a growth potential.

The bank was launched in October 2013 and will be fully operational as soon as it receives European Union (EU) state aid approval - hopefully by autumn 2014. The bank will not be present on the high street and won’t fund businesses directly but will instead work in partnership with other financial institutions.

Roy Emerson, former executive of Standard Chartered and now non-executive Chairman of the bank, said the focus would be on start-ups and early stage companies that find it difficult to raise finance from commercial banks and investors because of a lack of a financial track record.

In an interview Emerson said, “One of the objectives is to have an economic impact on company formation, employment and gross domestic product. Therefore you really have to look for the growth companies.”

The primary focus of the bank will be on small and medium companies that have a turnover of up to £25 million; however, it won’t shy from helping businesses with a turnover of £100 million.

Currently, the bank has received core funding to the tune of £1.25 billion from the government plus £2.9 billion of capital from existing state schemes. Despite critics believing that the amount of money is too little to make a huge impact, the Chairman, Mr Emerson has affirmed that Vince Cable’s flagship bank would take a “very targeted approach” over the next 5 years to unlock £10 billion of extra public and private finance for SMEs.

The bank will part-guarantee loans for small and medium businesses through new and existing banks and alternative sources of finance such as peer-to-peer lenders, and co-fund investment by venture capital and business angel networks.

In early 2014 the bank will start lending to small businesses - it has already allocated £45 million to two debt funds to achieve that. Moreover, to support SME lending the bank is in the process of negotiating wholesale guarantees for the banking sector.

“If economic growth is sustained, this is a great time to be in the market helping this sector,” Mr Emerson concluded.